Crisis Budgeting: How to Survive Financial Catastrophe And Thrive on the Other Side

When you’re a single parent, it doesn’t take much to knock you into a financial crisis.

Sudden job loss… flooded basement… a sick or injured child… dozens of things can make you dip into and use up your emergency savings. And those financial setbacks can leave you struggling to make ends meet.

Lots of times, those events pile on top of each other. And like so many of you, I’ve lived with financial anxiety, and had months where I  couldn’t pay all of my bills.

When you’re stuck inside a financial crisis, the usual money advice doesn't work. You need call on financial survival skills. That means turning to extreme money management actions until you can get back on your feet.

Before you do anything, stop. Take a breath. Stress can cloud your thinking and send you into a panicky brain spiral. It can make bad moves seem good… and that can put you in an even worse situation. So calm yourself down as much as you can, however you can. Be kind to yourself, and give yourself a break.

Remember: This situation is temporary.

We’re going to talk about some emergency steps you can take navigate your financial crisis. Some of them will work for you, others won’t. Some of them may feel hard to deal with, but try to do them anyway.

You will get through this. And you will get back to a place of better financial health.

Your First Move Keeps Things from Getting Worse

When you can’t pay all of your bills, you have to prioritize them. Anything that affects your family’s life and health goes to the top of the list. These are your basic survival expenses and they include:

  • Rent or mortgage
  • Utilities (electricity, phone, internet)
  • Food
  • Medicine
  • Transportation (you have to be able to get to work or doctor’s offices, for example)

If the money you have won’t cover your absolute necessities, get in touch with those creditors immediately, before you miss a payment. This communication is key. It can help you avoid things like late payment penalties and hits to your credit score, both of which will make financial recovery even harder.

Call your mortgage lender or landlord, all of the utility companies, and the lender that’s managing your car loan. Tell them that you’re facing a financial setback that makes it impossible to pay the full amount due on time, but that you have a plan in place to fix the problem. (Say that even if you don’t have that plan 100% figured out yet.) Let them know that you’re working hard to make payments, but you would appreciate.

Reassure them that you’re working to make your payments, but that you would appreciate more lenient payment terms, just until you get back on your feet. Examples of relaxed payment terms include:

  • deferring payment for a month or two
  • making a few small payments instead of a single big payment
  • extending or changing due dates
  • temporarily reduced payments

Once you have your high-priority expenses covered, reach out to the rest of your creditors.

If you have student loans, contact your servicer to see if you qualify for a different repayment plan. You can find out more about different student loan repayment plans here.

Call your credit card companies and give them the same information – you’re having a hard time, you have a plan, you’ll make payments ASAP. Ask them to waive late payment penalties and penalty interest rates, and to hold off on reporting to credit agencies.

When you reach out to creditors before you miss a payment, they’ll be much more open to helping you. And that can make it much easier to recover when this temporary financial crisis has passed.

You can find resources to help you keep your home at www.hud.gov.

You can find help paying utility bills at www.usa.gov/help-with-bills.

Find Extra Money Anywhere You Can

When you don’t have enough – or any – money coming in, you have to get creative. You might be able to find money in new places or places you forgot about.  Right now, even small amounts of extra money can help create room in your emergency budget.

Look for any work you can reasonably do as a single mom. There are work-from-home jobs and side gigs you might be able to manage on top of your other responsibilities. Another option: Consider trying to build your own business – one you can actually do with kids around – to keep money flowing in.

Possible places to free up or find money include:

  • Decreasing the withholding taxes on your paycheck, if you’re still getting one, will boost your take-home pay (but be aware you may end up with a tax bill when you file next year)
  • Pause all of your automatic savings – yes, including retirement savings – for now
  • Turn off autopay for your bills to give yourself back control over when payments will be made
  • If you have rewards points available, use them to pay your bills or to buy groceries and other necessities
  • If you have any money in an HSA (health savings account) or FSA (flexible spending account), use that money to cover all your medical expenses, which includes more than you might realize
  • Make just the minimum payments on your credit cards (if you can, just for now)

These crisis tips can help free up some much-needed money until your finances get back on track. Next step: Make deep cuts to your expenses. Some will be temporary. Others may become permanent. All of them will help you stretch every dollar.

Find a full list of allowable HSA and FSA expenses here: https://www.irs.gov/publications/p969

Preserve Money Wherever You Can

Once you’ve worked on increasing the money coming in, you’ll need to figure out way to spend less. When you’re already working with a pretty bare bones budget – like many single moms do – it might seem like you can’t possibly find ways to cut your spending. I hear that, but there might be some things you haven’t thought of that could help preserve some cash.

Cancel or pause any services (like a gym membership, multiple streaming services, or subscriptions) that you can do without for now. When you look through your credit card bills, you might be surprised at how many regularly monthly payments you’re making for services you rarely – or never – use anymore.

Cut back on grocery spending can be tough, especially with kids to feed. Some possible options to minimize your current food bill include:

  • using all the food in your pantry – easier if you turn it into a sort of Kid’s Chopped Challenge
  • planning all of your meals in advance, making a focused shopping list, and sticking to your list when you go to the store
  • avoiding prepared foods and pre-packed or single-serve foods and snacks
  • use every coupon you can find – dozens of websites and apps like Coupons.com offer up free coupons

You can find resources for food assistance here: www.nal.usda.gov/fnic/usda-nutrition-assistance-programs 

Other ways to cut costs – at least temporarily – include things like

  • lowering the temperature on your hot water heater
  • getting rid of cable
  • increasing the deductibles on your homeowner’s or renter’s and car insurance
  • switching to a cheaper cell phone plan

More permanent cost savers include:

  • switching to a programmable thermostat
  • refinancing your debt (if you can get a lower rate)
  • moving somewhere with a lower cost of living

Need more ideas? Google “reduce household expenses” and you’ll see thousands of websites devoted to living more frugally.

Give Yourself a Splurge

Even during the darkest financial times, you need something to keep you going. 

Pick a (reasonable) splurge – any splurge – and include it in your crisis budget. Your favorite ice cream, a manicure, whatever makes you feel good. Giving yourself that one good thing will help you stick to the rest of the emergency measures.

Next Steps

Once your financial crisis is over, you need to start preparing for the next one… because there will be a next one.

Replenish and increase your emergency savings. Line up multiple sources of income. Keep paying attention to your spending, and stick to your regular budget. Before you know it, you’ll make the transition from financial crisis to financial freedom.

Need help creating a budget, finding places to cut expenses, or figuring out your financial emergency plan? Contact me today and we’ll work it out together.

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